Limited Partnerships : Limited Partnership Essay
Description In a limited partnership as least one partner is limited and the other is a general partner. The limited partner is not involved in the day to day activities and has no voice in management. Legally they are not liable for all the financial obligations of the business.
Two Advantages 1. General Partners receive most of the profits; the limited partners invest money into the company and only get a certain amount of the profit.
2. Having a limited partner helps the business financially while the general partner still has complete control of the business.
Two Disadvantages 1. Limited partners are limited. They are not allowed to have any voice in the business or manage any of the business.
2. If the general partner dies then the business is dissolved and the limited partner cannot keep the business open unless otherwise stipulated in the agreement.
Liability The limited partner has limited liability and it keeps them from losing more than they invest while the general partner has unlimited liability for the firms obligations.
Income taxes There is no legal distinction between the owner and business, all income generated by the business will be considered personal income to the owner. Sole proprietors are taxed the highest rate of taxation.
Continuity of the organization If the business is dissolved, the limited partner’s share has priority over funds due by the general partner, except is subordinate to claims of the firm’s creditors. If…